Armed with insight

Highlights of the Allan Gray Investment Summit

On 31 August 2017, over 2000 people descended on the Sandton Convention Centre to attend the Allan Gray Investment Summit. The world is a scary place for investors with global stock markets at all-time highs, political leadership in question and world debt at staggering levels. “We put together the Investment Summit in an attempt to arm investors with the best insights available to navigate the current precarious landscape. Investors got a rare opportunity to access an expert group of diverse local and global investment leaders, under one roof,” says Jeanette Marais, director of distribution and client service at Allan Gray.

Wealth managers from Absa Wealth Management and Nedbank Private Wealth looked at how much you need in order to retire and what investors need to do in order to ensure that they remain on track. Investor behaviour was identified as a driver to long-term investment success and it was pointed out that financial advisers play a key role is guiding investors along this journey.

The biggest risk which investors face is themselves, because the mistakes they commonly make are based on their own behaviour and personal biases, warned Morgan Housel, a partner at Collaborative Fund in the US and a former columnist for the Wall Street Journal. “Everyone has their own unique experience of the world,” he said. “If you are your own worst enemy and pose the most risk it’s a scary reality to face, but to me there’s a lot of optimism in it.

You have no control over what the stock market or what the economy might do next, but one thing you can control is your own behaviour.”

As an analogy for counter-intuitive investor behaviour, Housel used an analysis of how people had put their lives under more jeopardy, rather than less, after the 9/11 terror attacks in the US by opting to drive, rather than to fly. While driving may feel safer, research and data indicate that more people die in cars in 11 days than flying commercially in 30 years. One of the most common destructive investor behaviours is buying and selling at the wrong time.

Another topic at the Summit was whether this is a good time to invest and if so, where should we be putting our money? Now is a good time to invest, despite buoyant share prices and deep anxiety over the world’s uncertain political and economic outlook, said Summit presenter, Todd Buchholz, a former US White House economic advisor who correctly predicted the plunge in oil prices, the downturn in commodity prices and the start of the US economic recovery. This is because there are signs of a synchronised global recovery, which would continue as long as three important pillars—low interest rates, low inflation, and the absence of trade wars—remained in place, he said. Buchholz said that one of the factors which should sustain the pickup in US growth was that although President Donald Trump had sparked consternation with his provocative statements, he was not “picking on” industry and had allayed its fears over possible new taxes and regulations.

Global inflation would remain in check, allowing interest rates to stay low, which meant that business could afford to invest and retailers would continue to prosper, he maintained. Concerns that deepening tension over trade agreements would spark outright trade wars had so far been unfounded, and if that remained the case stocks would continue to rally, he added.

Buchholz also predicted that “the sun was setting” on China’s sustained economic outperformance in the global economy, largely because the effects of higher wages and unfavourable demographics in the country were starting to make themselves felt. “Over the next 12 months commodity prices could briefly spike but are likely to either plateau or fade back again.”

She explained that it's essential to do your homework to find the right property in the right area, taking into account the price you pay; your net yield, which is your rental income minus your expenses; and the risks, which include how long your property may be vacant for, late-paying or non-paying tenants and the legalities of removing unwanted tenants.

Eight leading fund managers were featured across a local and an offshore panel. The South African segment included some of the biggest and most successful long-term managers in the country and it was a treat to see them drill down into the shares they find attractive.

Bruce Whitfield chaired the panel, which included Allan Gray’s Andrew Lapping, Coronation’s Charles de Kock, Investec’s Sumesh Chetty and Prudential’s Chris Wood. The offshore panel featured fund managers from Fundsmith, Orbis and Schroders from the UK, and Nedgroup Investments from the USA and was chaired by Andile Khumlo.

Orbis revealed that they are interested in a number of companies in the global ecommerce space, which include JD.com in China and MercadoLibre in Latin America. “We think what’s missing is that this shift to ecommerce is such a long and gradual process that these companies are not pricing in their long-term potential,” said Dan Brocklebank from Orbis.

The Allan Gray Investment Summit concluded with an expo where investors could visit the investment professionals at their stands and discuss their own investment needs.